THE MACROECONOMIC COSTS AND GAINS OF QUASI-FISCAL ACTIVITIES BY THE RESERVE BANK OF ZIMBABWE
Date
2014-02-19
Authors
Chikuruwo, Leon
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Abstract
Central Banks across the world sometimes take up unconventional policy actions by
embarking on Quasi-Fiscal Activities (QFAs) for social, economic or political
obligations of government. These activities are fiscal in nature and are carried out on
behalf of government by different institutions including Central Banks. This paper
assesses the scope and coverage of QFAs by the Reserve Bank of Zimbabwe (RBZ)
between 2004 and 2008. Seven respondents were purposefully selected in this
qualitative ex post impact assessment study. The selection criterion of one RBZ
official, two economists, two financial sector officials, and two from the academia
was on the basis of their unique status, experience, and knowledge of the Reserve
Bank and its policy actions. Policy documents, project reports, and transcribed
interviews informed the findings of this research. Polarised views were drawn
between the RBZ sources and other respondents. The RBZ was of the view that the
economicchallenges due to sanctions on Zimbabwe were minimised by its
extraordinary interventions. The other respondents acknowledged the short-term
benefits but, maintained that the interventions exacerbated the county’s
macroeconomic misfortunes. Negative economic growth, high unemployment, and
hyperinflation pointed to the negative impact of QFAs. This report contends that
although isolated positive trends were traced in the RBZ QFAs, their macroeconomic
costs outweigh their gains. Central Banks are recommended to focus on their
monetary policy mandate and avoid QFAs because fiscal policy objectives often
dominate the interventions. The continued existence of QFAs of Central Banks calls
for further research into the politics of QFAs.
Description
MM (P&DM) thesis
Keywords
Reserve banks, Banks and banking, Macroeconomics